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Daily Range – the difference between the high and low during one trading day.
Day Order – an order to buy or sell stock that automatically expires if it can’t be executed on the day it is entered.
Debt to Equity Ratio – indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long-term debt by common stockholders’ equity. Although it is used to measure the company’s risk of not being able to service its debt, the ratio is only meaningful if the equity is somewhat representative of the market value of the company’s equity.
Declaration Date – the date on which a firm’s directors meet and announce the date and amount of the next dividend.
Deflator – an index used to convert values in the national income and product accounts from current dollars to constant or “real” dollars.
Delta – the amount an option will change in price for a one point move in the price of the underlying security.
Depreciation – systematic charges against earnings to write off the cost of an asset over its estimated useful life because of wear and tear through use, action of the elements, or obsolescence.
Derivative Security – a financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security.
Diagonal Spread – an options strategy in which the purchased options have a longer maturity than the written options. The purchased options also have different strike prices. Examples of Diagonal Spreads are: diagonal bull spreads, diagonal bear spreads, and diagonal butterfly spreads.
Dilutive – having the effect of reducing the earnings per share. Whenever a company undertakes a key transaction, such as an acquisition or a refinancing, investors want to know whether the transaction is dilutive (reducing the earnings per share) or antidilutive (increasing the earnings per share). Often, the company’s announcement will state what the effect is. The effect usually varies depending upon what period of time is assumed in the calculation. The most common meaning is the effect on the results for the trailing 12 months. Often, however, managements will refer to the anticipated effect on earnings per share in the year ahead. If a company acquires another company with a rapid growth rate, the effect on earnings per share will typically be dilutive on historic earnings per share or the current year earnings per share, and antidilutive for a period in the future.
Divergence – a situation when two or more averages or indices fail to show confirming trends.
Diversification – the process of investing in several different types and categories of securities with returns that are not directly related, and/or in several different markets, in order to lower the investment risk. For example, an individual who invests in penny stocks, blue chip stocks, bonds, and futures will be exposed to less overall risk than one who invests solely in a single category of securities.
Dividend – an amount distributed out of a company’s profits to its shareholders in proportion to the number of shares they hold. The amount is normally based on profitability and is taxable as income. A “stock dividend” does not involve a cash payment, but rather is similar to a stock split.
Dividend Reinvestment Plans (DRP) – plans offered by many corporations for the reinvestment of dividends, sometimes at a discount from market price, on the dividend payment date. Many DRP’s also allow the investment of additional cash from the shareholder. The DRP is usually administered by the company without charges to the holder.
Dividend Yield – represents annual dividends divided by current stock price.
Dividends per Share – dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term.
Dollar Cost Averaging – the practice of steadily contributing smaller amounts of money into an investment rather than one lump sum at once. Studies have shown that Dollar Cost Averaging lowers risk over time.
Double Bottom\Double Top – in technical analysis: a decline or advance twice to the same level (plus or minus 3%). It indicates support or resistance at that level.
Dow Jones Industrial Average (DJIA) – an average composed of 30 major stocks, that is one of the most closely watched indicators of the market. The indicator is “price-weighted”, a rare method, meaning that it is simply the sum of 30 prices divided by a divisor to maintain consistency with the index through time. (The very first average price of the 12 stocks in the initial index, on May 26, 1896, was 40.94.) Because of the price-weighting (in contrast to the more widely used weighting by market capitalization), high-priced stocks have proportionately more effect than low-priced stocks. The divisor is currently around 0.20, so that a $1 change in a component stock shows up as a 5-point change in the index.
Because of the limited number of stocks and the similar nature of the stocks that are used in calculating the average, some experts consider the Dow to be a better measure of what is happening to blue chip stocks than a measure of what is happening to the overall market. See also S&P Indexes, Russell 1000, 2000 and 3000.
Downgrade – a negative change in ratings for a stock or other rated security.